Purpose This study seeks to explore the moderating impact of relationship conditions existing between a customer and its suppliers on the uptake and effectiveness of the customer's environmental performance requirements (otherwise known as “green‐supply”). Design/methodology/approach The study assesses the extent to which a supplier's environmental performance is influenced by its customer's environmental performance requirements when specific relationship conditions (investment, contracting and monitoring routines) are taken into account. Data were collected through a survey of first and second tier component manufacturers in the Australian automotive industry and analysed using linear regression and MMR. Findings Suppliers were found to be more responsive to their customers' environmental performance requirements where increasing levels of relationship‐specific investment occurred. As the level of investment in the customer‐supplier relationship increased, suppliers become less likely to believe that they would be penalized for non‐compliance with the customer's environmental performance requirements. Research limitations/implications Survey data were collected in 2004 and are limited to the Australian automotive industry. The sample size available for the regression analysis also precluded the use of more comprehensive analytic techniques. Practical implications The research offers new insight into the issue of how firms might improve the environmental performance of suppliers and the sustainability of their supply chain. Originality/value Virtually no research exists on the actual effectiveness of green supply requirements when placed in context with the realities of inter‐organizational dynamics. The findings suggest that traditional operations theory on inter‐organizational performance improvement is just as relevant to the use of environmental performance requirements.
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